Sponsor wants to pay me monthly to write their LP updates. Do I need a license for that?

Question

I manage 140 units for a sponsor who has four syndications, and he asked if my team would take over the quarterly investor updates and answering LP emails. He'd pay a flat monthly fee. My first thought was fine, I already write the property reports the updates are built from.

Then someone told me anything investor-facing is securities territory and I'd need to be registered. I looked it up and got very confused, because everything I found was about people getting paid to bring investors in, which isn't what he's asking. But the updates do sometimes end with "we're opening our next deal soon, reply if you want the deck," and I assume that sentence is the problem.

Where's the actual boundary? And does it change if I'm the one on the phone when an LP calls with a question?

Rena Guide · Accepted Answer

The sentence you flagged at the end of the update is the right thing to be nervous about.

Here's how the two activities differ. Ongoing investor relations for people who are already invested covers reporting on performance, sending distribution notices, delivering K-1s, answering questions about an existing position, keeping records current. That's servicing an existing relationship, and it's routinely done by employees, property managers, and outsourced IR firms.

Soliciting investment is different. Offering a new deal, describing terms, pitching, screening interested investors, following up with prospects. In the US, being compensated for that activity, and especially being compensated based on how much money comes in, is the area that broker-dealer registration rules are built around. Whether any specific arrangement crosses that line depends on facts and on state law as well as federal, and it's a question for a securities attorney rather than a forum. That's the one sentence of legal caution I'll give you, and you should get it answered before the first invoice.

What this means practically: your flat monthly fee, unconnected to any raise, is a much cleaner starting point than a percentage. Keep new-offering material out of the update you write and let the sponsor send that separately from his own address.

On the phone question, the answer isn't yes or no, it's about scope. Answering "when does the March distribution hit" is servicing. An LP steering the call toward the next deal and you continuing the conversation is where the character of the call changes, and the useful habit is a hand-off line back to the sponsor. Also get your engagement letter to say who approves the numbers you publish, because you'll be writing them and he'll be responsible for them.

laurenkim53 · Answer

Does the size matter here at all? The deals I look at in my markets have six or eight investors, all people the sponsor knows, and the update is basically a long text message. Feels strange to think registration rules would sit on top of that.

dpatel_re · Answer

hollow, the number of investors isn't the variable. Compensation is. If trellis is paid $3,000 a month whether or not a dollar comes in, that's one fact pattern. If he's paid two percent of what a warm LP wires into the next deal, that's a different one, and it looks the same from six investors as it does from six hundred. Small and friendly doesn't move the line, it just lowers the odds anyone complains.

monica_tran3 · Answer

I price this work as a flat retainer with a per-deal add-on for onboarding new subscriptions, and I keep a hard rule that anything describing an offering goes out under the sponsor's name, not mine. Also check your E&O policy language. Mine was written for property management and my broker's first read was that investor communications sat outside it, so we bought an endorsement. Cheaper than finding out later.

dmitri_v6 · Answer

The other document to read is the operating agreement for each of the four deals. Some of them specify who's authorized to communicate with members and what the reporting obligations actually are, quarterly within 45 days, annual audited or reviewed statements, that kind of thing. If you're the one producing those and the LLC agreement says the manager shall deliver them, you want an indemnity from the manager in your engagement letter. And a clause on who owns the investor list when the arrangement ends, because that list is the sponsor's whole business and he'll assume it's his without ever writing it down.

Sponsor wants to pay me monthly to write their LP updates. Do I need a license for that?

5 replies